Stock Smarts: Wartime Buy Signs!
Any doubts about whether this market is trading on war and terror were certainly erased last Tuesday. That's when we heard from Usama bin Laden. Stocks were solidly up in the morning, but headed south on news of another tape from bin Laden supporting Iraq and calling for more terrorism here in America.
Things are tense after Hans Blix's report to the U.N. last Friday. Buying stocks in wartime is clearly a challenge - what do we need to look out for now?
Charles Payne of Wall Street Strategies thinks that the first thing you should look at are the "non-buy signs." He says that a lot of companies are "bailing out" in terms of last quarter's earnings reports, using the possible war as an excuse for not providing specific guidance. And while he concedes there are a lot of unknowns because of the possible war, he wants companies to come out with definitive statements about what will happen either with or a without a war - publicly traded companies owe it to investors. He thinks investors' portfolios should be 50% in cash. And investors should focus on companies that do put out good earnings reports especially if they are showing support for their stock with buybacks.
Dagen McDowell of FOX Business News says there is some legitimacy to companies' uncertainty because of the war scenario. And she cited Alan Greenspan's testimony to the Senate Banking Committee earlier in the Week. Greenspan said businesses would pick up spending once the conflict with Iraq is settled. She says now is the right time to buy some stocks and avoid the herd that is gravitating toward bonds and gold.
Hilary Kramer of FOX Business News says that companies really don't know what is going to happen with their businesses because of the war. Hilary is looking at financial institutions and defense companies for possible buys.
Jonathan Hoenig of Capitalistpig Asset Management says if there are buy signs out there, they aren't really in stocks. He sees buy signs in fixed income, in energy prices and in instruments that aren't correlated with the dollar. He says the trend for equities is still down.
Jonas Max Ferris of Maxfunds.com thinks there is a lot of overreaction to the war news. He says there is a knee jerk reaction to run to the safety of bonds, oil, and gold and he thinks all of those investments will collapse once the war situation is resolved. He says it's time to take some risk with stocks that will bounce back big when the conflict is resolved. He agrees with Dagen that you should not follow the herd - stocks will rally off of the lows.
Be$t Bets: Signs Say Buy...
Which stocks have the "buy signs" pointing in the right direction? Our panel looks to the signs for some potential winners.
Hilary's signs say buy... Heinz (HNZ)
52-week high: $43.48
52-week low: $29.60
Friday's close (2-14-03): $31.28
Hilary says this is an opportunity in uncertain times - consumer staples, especially ones of value, are worth a look. Charles is middle of the road on this one -he doesn't hate it, but he doesn't love it. Jonathan says he's more inclined to bet against this stock with a short play rather than bet on it long.
Jon's signs say buy... Putnam Master Income (PIM)
52-week high: $6.71
52-week low: $5.65
Friday's close (2-14-03): $6.56
Jonathan says income is working. And, he says, this bond fund is a great way to play that action. Charles agrees that bonds are working - but, he says, the long-term chart (over the past five years) on this stock isn't great right now - but over the next month, this might be a good play. He would consider convertible bonds as income plays here instead. Hilary likes this pick for a bond fund. (Jonathan owns this fund.)
Charles' signs say buy... Qualcomm (QCOM)
52-week high: $44.65
52-week low: $23.21
Friday's close (2-14-03): $34.70
Charles calls this is a "quasi-controversial" pick, but he says it's the premier play on wireless technology, and it has really big upside potential. But he cautions that it is a very volatile stock. Hilary likes the pick. Jonathan says it could rally, but it is not a "best bet."
Mutual Fund Face-Off: Oil Bubble Boon!
Oil prices are spiking right now - but they could fall far and fast if we attack Iraq. Buy the right fund and you'll make money on that price drop - but which one? Dagen and Jonas offer their picks:
Dagen - Vanguard Total Stock Market Index Fund (VSTMX)
Year-to-date: DOWN 24.8 percent
Minimum Investment: $3,000
Expenses: $2.00 for every $1,000 invested
Jonas - Materials Select Sector SPDR (XLB)
Year-to-date: DOWN 13.8 percent
Minimum Investment: $18.35 (per share)
Expenses: $2.80 for every $1,000 invested
Money Mail
Dagen and Jonathan capped off the show by answering some of your questions.
Question: "Is it still okay to invest in international stocks with a possible war on the horizon?"
Jonathan still thinks that international bonds are a better play than international stocks. Jonathan did take losses on some international telecom plays (he mentioned NZT - New Zealand Telecom). He does like Argentina as a place to look abroad for international plays. Dagen says that international stocks are not a bad idea right now - for a small part of your portfolio.
Question: "If you were just starting out in stocks, what would be a good stock to buy?"
If you are just getting in to the market, Dagen says to go into a fund. Check out the Excelsior Value & Restructuring Fund (UMBIX) - which requires a low minimum investment of only $500. Jonathan says buy one ounce of gold.
Question: "I want to know the real reason Lucent (LU) isn't doing that well. What's the problem?"
Jonathan says that as of late, Lucent has been on a pretty good move up off of its lows. But Dagen says Lucent still has debts to pay, and that will hurt the stock.
Question: "I have been following Calpine (CPN) and think it might be a good time to buy at the bottom. Thoughts?"
Jonathan says that trying to buy at a bottom is a bad exercise for any stock purchase. Dagen thinks this stock is still a train wreck and to stay away.
Question: "I am an employee at Lowe's (LOW), and I can purchase company stock at a discount rate. Is this a good investment?"
Dagen says that in general you don't need to buy your own stock. But a discount is a discount, and it might be worth a try. Jonathan wouldn't buy the stock, but at a discount, it might be worth it.
Transcripts
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